Z accounts for the slight definitional variation. A successor in
interest is a person to whom a borrower transfers an ownership interest in a property securing a mortgage loan by means
of five different types of transfers.
Mortgage servicers (except small servicers) are required to
maintain updated policies and procedures that specify the following for successors in interest:
■ ■ ■ Required documentation needed to confirm status; and
■ ■ ■ Borrower notification process related to inquiries (acceptance,
need for additional information, or that they are not a successor in interest).
A person does not have to assume the mortgage, or be liable
on the mortgage loan to be a successor in interest under the Rule.
The RESPA provisions included in the 2014 servicing rules will
continue to apply as the Rule considers a confirmed successor in
interest a “borrower and/or consumer” for purposes of disclosure
and ongoing servicing. Hence disclosures, statements, and notices
would apply in the same way they apply to another borrower or
consumer. The Rule does not mandate that servicers send specific
written disclosures to a confirmed successor in interest if the
same disclosures have been provided to the borrower/consumer
or other confirmed successors in interest. The example provided
by the Bureau is if the servicer provides a force-placed insurance
disclosure to a borrower, it does not need to send the same force-placed insurance disclosure to a successor in interest. A successor
in interest may request information not initially provided to them
through the request for information process.
RESPA’s loss mitigation requirements apply to successors in interest who submit a loss mitigation application on a loan if they reside
in the property securing the loan. The servicer (unless exempted)
must evaluate the application even if the application was received
prior to confirming the eligibility of the successor in interest. The
servicer is prohibited from requiring the confirmed successor in
interest to assume the loan prior to making a decision on the loss
mitigation application. However, the Rule does not prevent a servicer from offering a loss mitigation option on the condition that
the successor in interest assume the loan as permitted by state law.
Servicers are required to send modified periodic statements or
written notices to consumers who have filed for bankruptcy. The
content of the statements or written notices will vary depending
upon whether the consumer is a debtor in a Chapter 7, 11, 12
or 13 bankruptcy case. The Rule provides sample forms for the
various types of bankruptcies to ensure servicer compliance with
these requirements.
Along with the Rule, the Bureau also issued an interpretive rule
under the FDCPA. Among other things, it provides safe harbor
from liability for servicers acting in compliance with mortgage
servicing rules in three specific situations:
1. When communicating information about a mortgage loan
with confirmed successors in interest;
2. When providing the written early intervention notice required
by RESPA; and
3. When responding to borrowers who initiate communication
related to loss mitigation after the borrower has invoked the
cease communication right within the FDCPA.
As a result of industry concerns over mid-week implementation
of the Rule, the Bureau issued non-binding policy guidance on
June 27, 2017. This guidance allows servicers to begin complying
with the new provisions three days early. This will allow institu-
tions to implement changes during the preceding weekend. The
non-binding guidance states that the Bureau does not intend to
take any supervisory or enforcement actions for violations of
existing Regulation X or Regulation Z provisions resulting from
a servicer’s compliance with the 2016 Rule, that occurs between
the beginning of the week and the actual effective date of the new
rules. This is true for both sets of new rules with effective dates
of October 19, 2017 and April 19, 2018.
Conclusion
Since the Bureau’s mandate requires a review of rules within five
years of their effective date, continued changes are inevitable.
Financial institutions must foster a culture and organizational
structure that will facilitate efficient and effective implementation of future regulatory changes. Clear and transparent internal
communications are essential. The efforts put forth and lessons
learned by mortgage servicers, to comply with the 2014 rules, can
provide for smoother implementation of the upcoming regulatory
changes. Avoiding the “silo approach” and involving third parties
as early as possible(such as systems providers who are crucial
to the process), will ensure a smoother transition. Training is
the key to ensuring compliance and providing the best customer
service in mortgage loans. Training should provide the entire
organization with understanding of the regulatory changes, and
further in-depth training should be created for the lines of business responsible for execution.
With a good understanding of these changes, how they apply
to your servicing function, and a measured approach to implementation by the effective date, you will be prepared! ■
ABOUT THE AUTHORS
JIM SHANKLE, CFSA, is a managing director at CrossCheck
Compliance. He provides firm clients with over 30 years of
experience in regulatory compliance and internal audit with
specific expertise in mortgage origination and servicing. Jim held
positions in consulting, as chief audit executive at an Ohio-based
thrift, and spent three years in the former Soviet Union on bank
privatization efforts in the newly formed independent states. Jim is
a Certified Financial Services Auditor (CFSA). Jim can be reached at
jshankle@crosscheckcompliance.com.
LIZA WARNER, CPA, CFSA, CRMA, is a managing director at
CrossCheck Compliance and a bank internal audit, compliance,
and risk management executive with over 30 years of experience
in the financial and professional services industries. Previously,
Liza was the chief compliance and operational risk officer for
a mid-size regional bank and has consulted with institutions
of all sizes on their internal audit and compliance needs. She
started her career in the internal audit function of what is
now one of the largest national banks. She is a CPA, a Certified
Financial Services Auditor (CFSA), and she holds a Certificate
in Risk Management Assurance (CRMA). Liza can be reached
at lwarner@crosscheckcompliance.com.
